In lean and agile prioritization, the concept of Cost of Delay (CoD) is crucial in the portfolio level. Cost of Delay is a concept that makes it possible for the decision makers to calculate and compare the cost of not completing something but choosing to do it later. So you simply prioritize the backlog by customer value and money.
But to be able to concretize what happens if the organization tries to carry out too many changes at the same time, a new concept like Cost of Overflow is needed. It monetarizes the consequences of blocking the business by trying to implement too much simultaneously – the cost of enough being enough.
Cost of Overflow is a wake-up call for the management providing them means to calculate the cost of driving too many parallel change initiatives at the same time.
Well, how to calculate CoO? Where’s the formula?
I’m not (yet) able to offer a nice and clean formula, but the key variable should be the estimated Stakeholder Impacts of the backlog items. This includes the time and effort of the business management, line managers, and other stakeholders, that is needed to make the change happen and stick. This needs to be multiplied with the hourly or daily rate.
The next step would be to compare the result with the Stakeholder impacts of the change initiatives or development items that are already being implemented, and with the estimated Organizational velocity i.e. the capacity of the business organization and customers to adapt new ways of working, solutions, services, systems, features etc.
These are important elements of the Cost of Overflow, but… the huge one is still missing:
What is the cost of having wasted time and money on the development items that fail or are not completed because of the overflow?